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Google (GOOG) will launch its digital bookstore in the U.S. by year-end, according to an official at the company. Whether it can compete with similar services from Amazon (AMZN) and Barnes & Noble (BKS) remains to be seen. The e-book industry is already crowded and many of the millions of e-book readers have already made a choice about which "library" to use. Amazon has a collection of 750,000 titles, which will be hard to match.

The new service will be called Google Editions. It will differentiate itself from its rivals in several ways. The first is that it will sell e-books that can be used on a variety of devices. "Users will be able to buy books directly from Google or from multiple online retailers -- including independent bookstores -- and add them to an online library tied to a Google account. They will be able to access their Google accounts on most devices with a Web browser, including personal computers, smart phones and tablets," according to the Wall Street Journal.

Google has established ties with a number of independent book publishers, who have often expressed frustration with the Amazon model in which the e-commerce site uses it huge leverage to pressure them on prices. Google Editions may give publishers better royalties, although that is not yet clear.

Google may build its new e-reader initiative by using its search features to offer people books related to search terms. This would give the world's largest search company an inherent advantage over competition.

It would be easy to dismiss Google's new project because it is late to enter a market in which large competitors have loyal customers. But it's worth remembering that Google's mobile operating system, Android, entered its market late. The mobile OS world was dominated by Symbian, Microsoft (MSFT) Apple (AAPL), and Research In Motion (RIMM). Google created a model that made it attractive to handset companies. If Google Editions offers special features and innovative technology, it can't be counted out of the race.